Obesity and related metabolic dysfunctions, such as type 2 diabetes, have emerged as a leading cause of morbidity and mortality in developed societies. The development of obesity and type 2 diabetes may be triggered or abrogated by central nervous system mechanisms. The hypothalamic melanocortin system plays an important role in the regulation of energy balance. The major anorexigenic peptide in the hypothalamus is alpha-melanocyte-stimulating hormone (1-MSH), the product of the pro-opiomelanocortin (POMC) gene. When released, 1-MSH is rapidly degraded, a process that is likely to play an important role in melanocortin signaling. We have identified a carboxylase enzyme, prolyl carboxypeptidase (PRCP), which is expressed in the hypothalamus and initiates degradation and inactivation of extracellular 1-MSH. We found that PRCP is expressed in neuronal populations that send efferents to areas where 1-MSH is released from axon terminals. We confirmed that 1-MSH1-13 is a substrate of PRCP, and PRCP-degraded 1-MSH (1-MSH1-12) is not neuroactive. Inhibition of PRCP activity by small molecule protease inhibitors administered peripherally or centrally decreased food intake in wild type as well as obese animals. In addition, whole body or lateral hypothalamic area-specific ablation of the PRCP gene resulted in resistance to diet-induced obesity. Taken together, these observations gave impetus to the central hypothesis of this proposal that PRCP is an important regulator of melanocortin signaling downstream of the melanocortin cells. We suggest that elevated PRCP activity promotes metabolic dysfunctions, including obesity and type 2 diabetes. To further our understanding of the role of PRCP in metabolic regulation, we propose the following specific aims: Specific Aim 1) we will study PRCP and melanocortin peptides levels in lean and obese mice. Specific Aim 2) we will study leptin and ghrelin effects on PRCP. Specific Aim 3) We will study PRCP in the development of obesity and type 2 diabetes. The execution of the above specific aims will shed light on a novel central regulatory element in the regulation of energy metabolism. Successful completion of these studies will deliver new drug targets for metabolic disorders, including obesity and type 2 diabetes.